A conventional bond is a loan: you lend money, and the issuer pays interest and returns the principal. Interest on a loan is prohibited, so conventional bonds are not permissible. Sukuk are designed to avoid this.
What a sukuk is
A sukuk certificate represents ownership of an asset, a share in a business, or the right to use an asset. The holder's return comes from what that asset earns, such as rent on a building, rather than from interest on a loan. Common structures are ijara (leasing), mudaraba and musharaka (partnerships) and wakala (agency).
Why the label is not enough
Some sukuk have been structured so that the issuer promises to buy the asset back at its original price, which makes the return resemble a guaranteed loan. Scholars criticised such structures, and AAOIFI's newer Shariah Standard No. 62 on sukuk tightened the requirements around real asset ownership and risk-sharing. A sukuk should give the holder a real claim on the asset and its performance, not just a fixed payment.
What to check
- Which structure it uses, and what asset or business sits behind it.
- Whether the sukuk has an independent Shariah supervisory board's approval.
- Whether the issuer, a bank for example, is itself a permissible business.
On Sanad
The sukuk list shows each instrument, its status and whether it has been assessed under Standard 62. As always, this is a screen, not a fatwa.